Sleep Number Posts Further Losses Despite Deep Cost Cuts

Sleep Number's cost-cutting measures failed to restore profitability, as sales plummeted despite a 21% reduction in operating expenses. The company's aggressive measures aimed to reset its cost structure, but plunging sales offset the benefits. Sleep Number continues to struggle with profitability.

Sleep Number Corporation (NASDAQ: SNBR) reported its second-quarter 2025 results, revealing a significant drop in sales and profitability, despite aggressive cost-cutting measures. The company's shares tumbled 21.3% premarket, highlighting the ongoing challenges in its turnaround efforts [1].

Financial Performance

Sleep Number reported a net loss of $25 million, driven primarily by lower net sales and partially offset by lower operating expenses. Revenue fell 19.7% year-over-year (YoY) to $328 million, missing the consensus estimate of $357.42 million. The company's gross profit margin remained consistent at 59.1%, while operating expenses decreased by $48 million, or 21%, to $185 million before restructuring costs [2].

Turnaround Efforts and Guidance

Linda Findley, President and CEO, stated that Sleep Number is in a turnaround, emphasizing the company's strong brand and differentiated products. The company is implementing significant changes, including enhanced marketing and product initiatives, aiming to return to profitable growth. However, the aggressive cost-cutting measures implemented at the beginning of the quarter led to a sharp drop in second-quarter sales [2].

Financial Outlook

For the full year 2025, Sleep Number expects net sales to be approximately $1.45 billion, representing an approximately 14% YoY decline. The company expects gross profit margin to be 61% and anticipates break-even free cash flow in the second half of 2025. The company's leverage ratio stood at 4.56x EBITDAR on a trailing 12-month basis, approaching but still below its covenant maximum of 4.75x, indicating limited financial flexibility [1, 2].

Conclusion

Sleep Number's second-quarter 2025 results underscore the company's ongoing struggle with profitability, despite aggressive cost-cutting measures. While the company maintains a strong brand and differentiated products, the turnaround efforts have yet to yield significant financial improvements. Investors should closely monitor the company's progress in implementing its strategic initiatives and managing costs to drive sequential topline improvement in the coming quarters.

References

[1] https://www.investing.com/news/earnings/sleep-number-plunges-21-as-q2-results-guidance-disappoint-investors-93CH-4160034
[2] https://www.morningstar.com/news/business-wire/20250729982295/sleep-number-announces-second-quarter-2025-results